Canada will be detrimentally affected by subsidised Alaska pipeline

The U.S. Senate version of the energy bill contains a potentially staggering subsidy of Alaskan natural gas that could handicap gas exploration anywhere else in North America, including Texas, warns the Canadian ambassador to the United States, Michael Kergin.

To ensure the commercial viability of a pipeline from Alaska to the south, the Senate bill would in effect guarantee a minimum price for Alaska gas producers, creating an incentive to maximise production in Alaska while minimising production elsewhere, particularly when prices are low.

It would have the perverse result of encouraging production first in high-cost Alaska, slowing exploration and development in Texas, Louisiana, Oklahoma and other low-cost areas.

Subsidised Alaskan gas entering the North American market would depress prices, slowing Canadian exploration and production and offsetting gains in production from developing Alaskan gas.